Puckin' Around With Spector

During the 2004 NHL All-Star Weekend at the Xcel Energy Center in St. Paul, Minnesota, with a lockout on the horizon, NHL Commissioner Gary Bettman made the following statement:

“With the right economic system, we can take the pressure off of ticket prices, and I believe with the right economic system, many, if not most of our teams, will actually lower ticket prices. I believe we owe it to our fans to have affordable ticket prices.’’

Bettman was referring, of course, to his and the team owners insistence on “cost certainty”, which they subsequently achieved with the implementation of a salary cap in the current collective bargaining agreement, at the cost of shutting down the NHL for an entire season by locking out the players,bringing the NHLPA to heel.

The notion the league was peddling - which many fans eagerly accepted at the time - was linking players’ salaries to high ticket prices, implying that if a salary cap were imposed, players salaries would drop, and ticket prices would follow.

That certainly appeared to be the case during the first season under the new CBA, as the average ticket cost dropped from $43.57 in 2003-04, the season prior to the NHL lockout, to $41.19 in 2005-06.

Alas, that was an illusion, as the reduction was based more upon enticing back disillusioned fans than with lower payrolls.

In the years since, ticket prices have substantially risen.

In 2006-07, the average ticket cost was at $43.13, nearly the same as ‘03-‘04.

By 2009-10, the cost was $51.51.

For the 2011-12 season, the average ticket cost is $57.10.

Then, there’s the cost for an average family of four to attend an NHL game.

Team Marketing Report annually posts the Fan Cost Index (FCI) for the major North American professional sports leagues. It calculates the cost of tickets, parking, concessions and souvenirs - four regular priced tickets, two small draft beers, four small soft drinks, four regular-sized hotdogs, parking, two programs and two adult-sized caps - a family of four might purchase at a sporting event.

In 2005-06, the FCI average to attend an NHL game was $247.25 US.

By 2009-10, it was $300.54 US.

For 2011-12, it’s $326.45 US.

So much for a salary cap making the cost of attending NHL games more affordable.

The truth is, that cost has no correlation to players salaries.

As Harvard sports law expert Paul Weiler explained in his book, “Leveling the Playing Field”, when ticket prices and other team revenues increase, so do salaries, not vice versa.

“The price of tickets”, wrote Weiler, “is ultimately determined by the interplay of supply and demand in that consumer market”.

In other words, a team charges what their market can bear.

That’s why the Toronto Maple Leafs and Montreal Canadiens charge the highest ticket prices - and have the highest fan cost index - in the NHL this season, while the Phoenix Coyotes and Dallas Stars have the lowest.

Detractors will immediately point out the Leafs and Canadiens are in the top ten in payrolls, hence the reason they charge as much as they do, while the Coyotes and Stars have lower prices because their payrolls are also among the lowest in the league.

They could also suggest the linkage of players salaries to revenue driving up the salary cap each season is to blame for the high costs.

That doesn’t explain, however, why the Winnipeg Jets, with the sixth lowest payroll in the league, charges the second highest ticket prices, and has the third-highest FCI.

Or why the Tampa Bay Lightning are fifteenth in payroll, yet have the third-lowest FCI.

What’s the explanation for the LA Kings having the tenth-highest payroll, but a FCI that is sixteenth in the league?

What’s the reason the San Jose Sharks have the ninth-highest payroll, but a FCI that is seventeenth overall?

Why does the Columbus Blue Jackets have the fifth-highest payroll, but the ninth-lowest FCI? Or the Buffalo Sabres having the fourth-highest payroll, but the fourth-lowest FCI?

There’s only one answer: their market, not their payrolls, determined their costs.

It’s clear the salary cap has not brought about the affordable ticket prices promised under a cost certainty system, and never will.

Fans should keep this in mind if the NHL tries to peddle the “lower player salaries equal lower ticket prices” meme during the next round of collective bargaining.

Comments

It also doesn’t help that the salary cap is now higher than what most teams were spending before the lockout. Only the Rangers, St Louis, Philadelphia, Dallas, Detroit, Toronto, and Colorado were spending above or close to the current salary cap, only NY and Detroit well about 70 mill.

And 22 teams were spending less than the 48 mil salary cap floor this year, many of them under 40 million, five of them 20 million under the current floor.

I would have liked it if they had kept the salary cap lower. But in the end, GM’s decided to sign players to ridiculous contracts again, which I believe is part of the reason the cap kept going up and tickets prices didn’t get any cheaper.

Anyone who thought that payrolls were driving revenues (as ticket prices) were utter fools. Prices are driven purely by market demand. The salary cap itself is a percentage of REVENUE.

Teams will set prices based on demand and strategies to grow their client base. Pricing any other way will simply destroy their gate revenue and break their business.

Posted by
Dave
on 11/02/11 at 01:51 PM ET

To expound on Dave’s point, anybody who believes what comes out of Bettman’s mouth in almost any circumstance is fooling themselves.

I have no idea why anyone would ever think that a team will only price up to a break even point and not a profit point. Bettman’s comments to the contrary were obviously false. Sports franchises aren’t 501(c) or non-profits like Habitat for Humanity.

As a corollary, I also have no idea why people would think that a team could not be financially viable in a hockey hotbed compared to a much larger but less hockey-concerned metro area. You get a 15 thousand seat barn like Winnipeg has instead of a monstrosity like the Lightning have, you sell it out most nights if not all of them, and you’re able to charge more per fan even though your metro areas fan to seat ratio is maybe 5 or 10 times smaller than it would be in Atlanta or Phoenix or St. Petersberg.

In 10 years we’re going to see at least another 1 or 2 NHL teams relocating north.

I made the same points in this post several times during the lockout, when I claimed cost certainty wouldn’t bring about affordable ticket prices. Nine out of every ten responses I received came from fans who disagreed with me, often vehemently, to the point where I was accused of being on the NHLPA payroll.

Just saw the prices for the Winter Classic. Outrageous. Peo sports are a rich man’s passtime. Whay blue collar guy can afford these prices.? The league is pricing 2/3 of North America out of the game, Both as players and spectators.

You and others state what should be a wholly convincing argument; however some will hear only what they want to hear. In the communications battle between NHL labor and owners appeals for support from fans must be received with skepticism and subjected to further inquiry.